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TELKOM SA SOC LIMITED

TKG JSE Listed
Market Cap
** ~R31.4 Billion

Investment Analysis: Telkom SA SOC Limited (JSE:TKG)

Date: 12 January 2026 Analyst Role: Senior Equity Analyst Subject: Telkom SA SOC Limited (The "Slimmed Down" Telco)

Step 1: Data Gathering & Source Verification

I have utilized the most recent financial data available as of January 2026, specifically the H1 FY2026 Interim Results (released November 2025) and the FY2025 Annual Results (released June 2025).

  • Reporting Period 1 (Latest Interims): Unaudited Group Interim Results for the six months ended 30 September 2025 (Released 18 November 2025).

  • Source File: Telkom Interim Results H1 FY2026

  • Reporting Period 2 (Latest Annuals): Audited Annual Results for the year ended 31 March 2025 (Released 10 June 2025).

  • Source File: Telkom Annual Results Booklet FY2025

  • SENS Activity: Reviewed announcements regarding the Swiftnet Disposal (concluded Jan 2025) and the reinstatement of dividends.

Step 2: Metric Extraction

  • Market Cap: ~R31.4 Billion
  • Dividend Yield (L12M): 4.25%
  • Calculation: FY2025 Total Dividend of 260.8 cents (Ordinary 163c + Special 97.8c from Swiftnet proceeds) divided by current share price (~R61.36).

  • Note: The dividend was reinstated in June 2025 after a multi-year suspension, signalling confidence in free cash flow.

  • Liquidity Check: Liquid / Low Risk

  • Average Daily Value: The stock is highly liquid, typically trading >R50m daily. It remains a key constituent of local indices.

  • P/E Ratio: 10.4x

  • Calculation: Current Price (6136c) / L12M HEPS (~587.5c).

  • Breakdown: Based on Trailing Twelve Month HEPS derived from FY2025 Full Year (544.5c) minus H1 2025 (262.6c) plus H1 2026 (305.6c). The forward P/E is trending closer to 9.5x as earnings accelerate.

  • Net Asset Value (NAV): 6,573 cents per share

  • Price-to-Book: ~0.93x. The stock trades at a slight discount to its net asset value, which is unusual for a tech/infra company, suggesting the market still discounts the "sum of the parts."

Step 3: Operational & Strategic Analysis

Business Overview Telkom has transitioned from a legacy fixed-line monopoly to a modern infrastructure company (InfraCo). Its primary revenue drivers are:

  1. Telkom Mobile: The consumer mobile data business (now the largest revenue contributor).
  2. Openserve: The wholesale fibre infrastructure division (homes passed and connected).
  3. BCX: The IT services and enterprise solutions arm (currently in turnaround).
  4. Swiftnet (Disposed): Analyst Note: The masts and towers business was sold in Jan 2025, and proceeds were used to pay down debt.

Performance Trend (H1 2026 vs H1 2025) The latest interims (Nov 2025) confirm the turnaround is gaining traction:

  • Revenue: Up 3.4% to R22.1 billion.
  • EBITDA: Up 7.4% to R6.0 billion (Margin expanded to 27.2%).
  • Mobile Growth: Mobile data subscribers jumped 26.7%, driving mobile service revenue up 7.9%. Telkom Mobile is effectively capturing market share from Vodacom/MTN in the prepaid data segment.
  • Debt Transformation: Following the Swiftnet sale, the Net Debt to EBITDA ratio collapsed to 0.7x (from 1.8x previously). The balance sheet is now "fortress" strong.

Sector Context

  • Macro Factor: The "Data-Led" Migration. While legacy voice revenue (landlines) is evaporating (-20.4% drop), the demand for data is insatiable. The South African sector is currently defined by the "Fibre Wars" (Openserve vs Vumatel) and the race for 5G dominance. Telkom's advantage is its massive existing fibre backhaul, which allows it to price mobile data aggressively.

Step 4: The Verdict

Bull Case (Buy Rationale) The "Deleveraged" Growth Story: The sale of Swiftnet was the masterstroke. By clearing R4.75 billion in debt, Telkom has removed the interest burden that was suffocating earnings. You now own a cash-generative mobile and fibre business with a clean balance sheet, trading at just 10x earnings, with a reinstated dividend. The 26% growth in mobile data subscribers proves their product is winning.

Bear Case (Sell Rationale) The BCX Drag: The IT services division (BCX) remains the "sick man" of the group, with revenue declining 4.4% in the latest half. If the enterprise sector in SA doesn't recover, BCX will continue to erode the gains made by Mobile and Openserve.

Fair Value Estimate R75.00 – R80.00

  • Justification: A re-rating to 12x P/E (in line with peers) or a return to 1.0x NAV would place the stock firmly in the R70s.

Final Rating: ACCUMULATE / BUY

  • Rationale: The risk profile has changed dramatically in the last 12 months. Telkom is no longer a "debt trap" risk. It is a focused InfraCo with growing earnings and a dividend. At ~R61.00, it offers excellent value relative to MTN and Vodacom.
AI Generated Analysis Last Updated: 2026-01-14